Its a mad world when it comes to food

April 16, 2024
Anthony Clark
Anthony Clark

Update on the soaring costs of soft commodity inputs & how food stocks are affected

Following on from my food and soft commodities of April 14th, I update the startling news that the worlds most ubiquitous grain has hit a record all time high over the weekend period of US$8.18 a bushel up from US$7.87 when I last wrote.

The usual culprits drove the market. 

  • The Russian / Ukrainian situation & concerns of how much will be cut from Black Sea exports into global field grains supply. 
  • The Biden administration changing the ethanol blend from E10 to E15 temporarily thus, boosting demand for corn (the main ethanol feedstock in the USA and its closely linked to the oil price) 
  • On-going concerns over globally tight stocks.

A the 1980s pop group Tears for Fears song from 1982 succinctly stated we live in a mad World.

Elevated weekly soft commodity increased have kicked into local SAFEX markets. My stance of being short food producers for the best part of two years and long agriculture remains intact. This morning the food producers sector looks sickly, no more so than Tiger Brands back at price levels last seen in 2009.

For my part I remain positive on Kaap Agri, TWK and Omnia. I have a special situation (well-articulated) on Libstar. The stock is unloved and presently subject to a 10 million share sale hit winding its way through the market depressing the stock. 

Ive also had standing buy recommendations out on Sea Harvest (December 2021 at R12.99) and on Oceana (March R52.00). I have no intention of changing this stance yet.

An ending to Black Sea hostilities would be the first catalyst to a reversal I elevated soft commodity prices (but) returns to normality regards production and exports will not occur quickly. So, I anticipate prices of soft will remain stronger for longer even if Putin withdraws his war a machine. Agriculture is not like a tapIt may be quite some time until normalisation in softs occur. Just my personal stance as a close market watcher and dont get me started on input costs and weather patterns.





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